Don’t cut Social Security, DOUBLE it

In the aftermath of the Great Recession, a debate over Social Security is heating up. So far, the debate has been between those deficit busters who say Social Security must be trimmed back to reduce government indebtedness, and others who want to maintain it as is.

But the New America Foundation just released a study that proposes a different approach: doubling the current Social Security payout and making it a true national retirement system. Creating a more robust system of “Social Security Plus” not only would be good for American retirees, but also would be good for the greater macroeconomy.

Here’s the dilemma that the U.S. faces. Since World War II, retirement has been conceived as a “three-legged stool,” with the three legs being Social Security, pensions and personal savings centered around homeownership. But today most private-sector employers have quit providing pensions, and state and local government’s public pensions are drastically underfunded.

In addition, a collapsed housing and stock market, combined with increased inequality even before the Great Recession, has drastically reduced Americans’ personal savings. In short, the “retirement stool” no longer is stable and secure. Suddenly, Social Security, which always has been viewed as a supplement to private savings, is the only leg left for hundreds of millions of Americans.

Studies show that people in the bottom two income quartiles depend on Social Security for 84% of their retirement income, and even the second-richest quartile depends on Social Security for 55% of its retirement income. Only the richest 25% of Americans don’t rely heavily on Social Security.

The real problem with Social Security is not, as its critics say, that it is underfunded. Contrary to gloomy predictions, the program is on solid financial footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream through at least 2037.

The bigger problem is that Social Security’s payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently, it replaces only about 33% to 40% of a worker’s average wage from the year prior to retirement (compared with Germany, where it replaces 70%). That is simply not enough money to live on when it is your primary – perhaps your only – source of retirement income.

Doubling Social Security’s individual payout would cost about $650 billion annually for the 51 million Americans who receive benefits. Here are some ways to pay for it.

First, lift Social Security’s payroll cap that favors the wealthy. Currently, Social Security taxes wages up to only $106,800 a year. Any income earned above that is not subject to the tax. The net result is that poor, middle-class and even moderately upper-middle-class Americans are taxed 12.4% (split between employee and employer) on 100% of their income, but the wealthy pay a much lower percentage. Millionaire bankers effectively pay a paltry 1.2%.

Making all income levels pay the same percentage – that’s how Medicare works – is popular with Americans and would raise about $377 billion.

Second, with all Americans receiving Social Security Plus, employer-based pensions would be redundant – so businesses would no longer need the substantial federal deductions they currently receive for providing employees with retirement plans. These deductions total a whopping $126 billion annually.

Those two savings alone would provide three-fourths of the revenue needed to double Social Security’s payout. Other possible revenue streams exist, such as reducing or eliminating other unfair deductions in the tax code that currently allow the top 20% of income earners to reap generous deductions that most low- and moderate-income Americans cannot enjoy. We also could implement this in stages, targeting first those who are most in need. And we could allow active seniors who have not yet reached full retirement age to take a half-pension and work a half schedule without losing their right to a full pension upon their retirement.

An expansion of Social Security – one of the most successful and popular social programs in American history, currently celebrating its 75th year – would be good for the macroeconomy as well because it would act as an “automatic stabilizer” during economic downturns, keeping money in retirees’ pockets and stimulating consumer demand. Benefits would be portable when changing from one job to another.

It also would help American businesses trying to compete with foreign companies that don’t provide pensions to their employees, because those countries already have generous national retirement plans. And it would be broadly fair, because even those higher-income Americans who are losing their tax deductions would see part of them returned to them in the form of a greater Social Security payout.

In short, Social Security Plus would provide a stable, secure retirement for every American and contribute greatly toward a solid foundation from which to build a strong and vibrant 21st century U.S. economy.

A provocative, remedy-based perspective on the joint complexities of economic stability and ever expanding technology.–Kirkus Reviews

“Hill hits Silicon Valley darlings like Uber and Airbnb alongside the former online black market Silk Road, right-to-work laws, and factory robots all under the umbrella of “naked capitalism.” He explains how the rise of the “1099 workforce” is not limited to Silicon Valley; more and more traditional jobs in fields like manufacturing are turning to contractors to perform the same tasks full-time employees used to do. In addition to costing workers in benefits and safety nets, misclassifying workers as contractors costs federal and state governments billions of dollars annually in lost tax revenue.” ―Washington Monthly

“For anyone driven crazy by the faux warm and fuzzy PR of the so-called sharing economy Steven Hill’s Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers should be required reading… Hill is an extremely well-informed skeptic who presents a satisfyingly blistering critique of high tech’s disingenuous equating of sharing with profiteering…Hill includes two chapters listing potential solutions for the crises facing U.S. workers…Hill stresses the need for movement organizing to create a safety net strong enough to save the millions of workers currently being shafted in venture capital’s brave new world.” ―Counterpunch

“A growing underclass scrambling to make ends meet at the whim of increasingly picky and erratic employers, that number could balloon to 65 million within 10 years, or about half of the domestic workforce, warns Steven Hill in his troubling new book, Raw Deal. This brand of worker abuse cuts across industries and company size. Hill calls out Uber, AirBnb, Merck, Nissan, and dozens of others. Hill does a nice job of putting it in starker, easier-to-understand ways.” ―Washington Independent Review of Books

“Steven Hill’s book Raw Deal is a red-faced, steam-out-the-ears indictment of sharing apps. Yet Hill offers a pragmatic, almost post-ideological solution: “individual security accounts” for workers. Companies that use independent contractors, or offer scant benefits for employees, would have to add on a certain percentage of their pay as a contribution to those accounts, which would cover health care, unemployment insurance, and more. There’d be a mechanism ― and a requirement ― for companies to contribute to the long-term well-being even of workers who aren’t on their traditional payrolls.” ―Boston Globe

“Raw Deal is a book for its time. Steven Hill perfectly captures the anxiety of the American worker in today’s increasingly digital economy. Hill presents some compelling ideas, the most important being something he calls the Economic Singularity. In this unfortunate tipping point, the concentration of wealth in the hands of the few results in economic implosion because the 99 percent can’t afford to buy anything the 1 percent has to sell. The United States is turning into a nation of 1099 workers who eke out a living driving cars, renting rooms and running errands for people who apparently have better things to do with their time. Throw in self-thinking computers and obedient robots, and there won’t be any work left for plain old Homo sapiens…Hill proposes that we offer 1099 workers a new safety net consisting of tax deductions, individual security accounts and multiemployer health care plans. All good ideas.” ― San Francisco Chronicle

This book is a must read for those concerned about how technology is disrupting the way we work and eroding the social safety net, and how policy makers should respond to ensure that the growing number of workers in the “gig” economy earn adequate benefits.—Laura D’Andrea Tyson, UC-Berkeley and former Chair of the US President’s Council of Economic Advisers

“Steven Hill’s groundbreaking book on the part-time, unstable ‘Uber Economy’ shows how a new sub-economy becomes a work of law-flouting regress undermining full-time work. Remote corporate algorithms run riot!”— Ralph Nader, consumer advocate

For many years, Steven Hill’s analysis, commentary and activism have helped shape our understanding of the U.S. political economy. His latest book, Raw Deal is A riveting expose that shows with alarming lucidity what Americans stand to lose if we don’t figure out how to rein in the technological giants that are threatening the American Dream.–Katrina vanden Heuvel, editor and publisher of The Nation

In Raw Deal, Steven Hill documents in frightening detail the ways in which new forms of work promise to plunge US workers and their families into further economic hardship, risk-assumption, and instability. Fortunately, Hill does not simply anticipate catastrophe; he closes the book with an informed call for institutional reforms that would lessen the negative consequences of these potentially dangerous forms of work. Anyone concerned with US working conditions – whether American workers, worker advocates, labor market scholars, or policy-makers – must read this book .— Janet C. Gornick, Professor of Political Science and Sociology, Graduate Center, City University of New York, Director, LIS: Cross-National Data Center in Luxembourg

Praise for Expand Social Security Now

“Read this book before you vote. Few issues are more important to your personal economic future. Steven Hill shows what’s at stake, and he offers solutions that Americans of all stripes can agree on.”—Robert B. Reich, author of “Saving Capitalism: For the Many, Not the Few”

“Steven Hill has written a barn burner of a book. Or perhaps I should say ‘myth buster,’ because he systematically demolishes the false justifications for slashing Social Security. In place of misplaced animus and misleading arguments, he offers a strong case for dramatically expanding America’s most successful domestic program in an age of rising inequality and widespread financial insecurity.”—Jacob S. Hacker, coauthor of “American Amnesia: How the War on Government Led Us to Forget What Made America Prosper”, Professor, Yale University

“Steven Hill has written a vigorous defense of Social Security, the country’s most important social program. While most political debate in recent years has focused on ways to cut Social Security or privatize it, Hill goes in the opposite direction and argues for a robust expansion. Hill proposes a Social Security program that would be adequate by itself to support a middle-class retirement.”—Dean Baker, co-founder of the Center for Economic and Policy Research, and author of “Getting Back to Full Employment: A Better Bargain for Working People”

“Steven Hill has produced a dynamite handbook for angry Americans who seek to take back democracy. The true contest is not Republicans versus Democrats. It is the American people versus Washington. And this is the sleeper issue the people can win. The governing elites in both parties are trying to eviscerate Social Security—arguably the most successful and most popular program created by the federal government. Hill explains why the political insiders and their Wall Street patrons are wrong about Social Security. He shows us how to mobilize to defeat the power elites and expand Social Security rather than destroy it.”—William Greider, author of “Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country”

Praise for Europe’s Promise

Financial Times: “Steven Hill is a lucid and engaging writer. He makes you sit up and think.”

The Economist: “In a new book, Steven Hill extols the European social contract for better government services. Life in Europe is more secure, he argues, and therefore more agreeable.”

Hendrik Hertzberg, The New Yorker: “Like a reverse Alexis de Tocqueville, Steven Hill dauntlessly explores a society largely unknown to his compatriots back home.”

Andrew Moravcsik, Foreign Affairs: “Europe’s Promise is a timely and provocative book . . . the “social capitalist” policies of European countries represent best practices in handling most of the challenges modern democracies face today.”